Are you thinking about investing in bullion? Gold and silver can be great assets to add to your portfolio if you use them for their strengths.
Bullion can help you strategize your investments through hedging. Bullion has not historically been an asset that delivers high growth despite periods where it has demonstrated rapid price gains. However, gold and silver prices have shown little correlation to the stock market. That makes bullion a great alternative asset if you are concerned about losing money in a stock market crash or a recession.
Sell or Hold: What To Do with Gold and Silver You Already Own?
Before we discuss the pros and cons of investing in bullion, you may be wondering what to do with the precious metals you already own. Many people start wondering about investing in gold or silver because they already own a jewellery or coin collection, and they’re not sure if they should sell it or hold onto it for a better opportunity.
Most investors tend to deal with high-purity bullion bars or coins. Most of these products are 99.9% gold or silver, which is much higher than most jewellery or other items that tend to use alloys with other metals for durability. Jewellery does not retain its value the way that bullion does, but you may want to hold onto it for a rainy day.
If you do decide to sell, precious metal buyers like Muzeum provide a convenient and clear way to liquidate those assets. They provide transparent pricing and will analyze any precious metal materials you bring with X-ray technology to determine their precise composition.
What Is Hedging?
Financial hedging is the practice of managing risks in your portfolio by investing in a secondary asset that can usually be expected to increase under the same set of conditions that would cause your primary assets to fall in value.
The practice is similar to hedging your bets, where you counterbalance a risky bet on one outcome by also betting on the opposite outcome. It’s a way of mitigating your losses when things don’t go your way – and the one thing all investors know about the stock market is that, eventually, things won’t go your way.
Why Is Bullion a Good Investment for Hedging?
This makes bullion the ideal counterweight to a portfolio that is primarily made up of stocks. Bullion, especially gold, is widely regarded as a safe haven asset. It’s better than cash, as it tends to hold its value against inflation in the long term (although it is worth noting that this is not always the case on a year-over-year basis). Meanwhile, the panic set off by stock market crashes tends to attract investors to safer assets like gold.
Stock markets inevitably go through rough patches where value is lost, and your investments suffer. While younger investors may be better able to handle that risk, as they have more time for their savings to recover, it’s generally accepted wisdom that investors should include more low-risk, stable assets, such as bullion, as they get closer to making withdrawals.
I am a writer based in London, specialising in finance, trading, investment, and forex. Aside from the articles and content I write for IntelligentHQ, I also write for euroinvestor.com, and I have also written educational trading and investment guides for various websites including tradingquarter.com. Before specialising in finance, I worked as a writer for various digital marketing firms, specialising in online SEO-friendly content. I grew up in Aberdeen, Scotland, and I have an MA in English Literature from the University of Glasgow and I am a lead musician in a band. You can find me on twitter @pmilne100.
